Intro to Management Accounting and Cost Concepts/Behaviour Flashcards
Differences between Management and Financial accounting
Management accounting is more internal, looks at owners, managers, employees. Focuses on both future and past info where financial accounting looks at just past
Changing role of MA and the management accountant
- Technological advancements and breakthroughs such as Big Data and analytics (so accountant needs to play a role in ‘validating information’
Now, focus on value for customers and sustainability, accountants need to be prepared for this
Importance of ethics in MA
Builds trust, promotes loyal, productive relationships with users
CIMA has written codes of ethics which serve as a guide for employees e.g.: integrity, confidentiality
What is a cost objective
Any activity for which a separate measurement of costs is required e.g.: inventory valuation
What is a cost object
Anything for which cost data is desired e.g.: products, customers
What is a cost classification
Grouping together costs which share the same attributes
Direct vs Indirect costs
Direct costs are costs of things that directly link to the product e.g. for a car: radio, lights
Indirect costs are indirectly linked to the product, common to all products e.g.: for the car: cleaners, maintenance workers
What is the manufacturing overhead
Manufacturing costs that cannot be traced directly to units produced e.g.: tiny screws in cars
Prime cost =
Direct materials + direct labour
Conversion cost =
Direct labour + MAN OH
What is indirect materials and indirect labour
Indirect materials are materials necessary for production but not part of finished product
Indirect labour is all labour other than those who turn raw materials into finished products
What is a period cost
A non-stock related cost e.g.: marketing, administrative
What is a product cost
A cost that is incurred in purchasing or making the product
How do product costs go into the balance sheet
As assets and only go through the profit and loss when they get sold
How do period costs go through the profit and loss
In the period in which they are incurred, never in inventory